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Zawya
29-05-2025
- Business
- Zawya
Tariff turmoil causes issues for carriers amid global uncertainty
AIRLINES worldwide are grappling with the trade whiplash initiated by the U.S., and operators are preparing for various types of scenarios. The global economy faces much more uncertainty than before the Trump administration's tariff announcements. For those attempting to plan, the range of possibilities is broad. When average tariffs were low and change, when they happened, were only minimal, businesses could work within a more predictable range of possibilities. That world is in the past Businesses must attempt scenario planning for an unprecedented range of future tariff outcomes. These could be positive or negative, but the key point is that the much wider range of uncertainty makes planning for the future challenging. An obvious consequence is that investment decisions will be delayed or even cancelled. For aviation, the outlook is deteriorating. Tariffs and trade wars do not boost economic growth. Risks of an economic slowdown, possibly a recession, are growing. Inflationary pressures and higher borrowing costs add to the uncertainties. These economic concerns are likely to mean lower demand for air travel and for air cargo transport, which is faster but costlier than road, train or maritime options. For aerospace manufacturers, the imposition of increased tariffs will lead to higher costs of production. This will ultimately feed through to higher fares. Aviation supply chains are complex and global, with components arriving from suppliers and subcontractors all over the world, regardless of the location of final assembly. Raised prices and a consequent reconfiguring of global aviation supply chains are likely to lead to even more delivery delays and capacity constraints for airlines. A more fundamental impact is likely to be felt by airlines in the form of weaker demand, both in passenger and cargo traffic. Passenger demand is linked to GDP growth, and the outlook for the global economy has deteriorated. This reflects a number of factors that include reduced trade flows; the impact of falling stock markets on individual wealth; increased bond yields signalling higher government borrowing costs; and concerns about rising inflation. All these can lead to economic downturns. ALSO READ FROM NIGERIAN TRIBUNE: PDP labels Tinubu's two years a 'nightmare' The consequences for flag carriers/long-haul airlines are likely to be more challenging than for LCCs or those with less exposure to the U.S. market. Major U.S. airlines warned in March about weaker domestic demand, both corporate and consumer, because of growing economic uncertainty. Airlines exposed to the North Atlantic market face particular demand uncertainty. There is already evidence that recent actions by the Trump administration are leading people to put off booking travel to the U.S. Tighter border and immigration controls, new tariffs on imports into the U.S., and expansionist territorial claims are unlikely to be seen as positives by non-American visitors. Premium cabins drive long-haul profitability, especially in markets like the North Atlantic, but filling them could become more difficult. Reduced trade flows lead to lower business traffic and falling demand for business class. Demand for premium cabins from private leisure travelers has helped to make up for lower business traffic in the recovery from the pandemic. However, this demand is vulnerable to the falling net worth of individuals resulting from stock market declines. This also typically has a negative impact on consumer spending. In the latest update of its World Economic Outlook, the International Monetary Fund cut its global growth forecasts. The U.S. and Europe are forecast to have weaker GDP growth than any other major world region, which is likely to mean weakening demand for North Atlantic air traffic. Indeed, there was a 17% year-on-year fall in visitors by air from Western Europe to the U.S. in March. Schedules for the 2025 second quarter indicate that airlines are starting to trim North Atlantic capacity. Air cargo traffic growth, closely linked to trade flows, is also correlated to GDP growth. A trade war is bad news for air cargo demand and for those airlines with significant cargo operations. Tariffs, regardless of level, will add to the downward pressure on demand. LCCs, which tend to be more focused on short- or medium-haul, the economy cabin and passenger traffic, are better placed than flag carriers. Nevertheless, a softer economic outlook is not welcomed by any airline. There are two factors that may provide some relief to airlines, particularly those outside the US. One is a weaker dollar, which will lower the cost to non-U.S. airlines of USD-denominated costs, the most significant being aircraft and oil. However, airlines with significant U.S.-originated sales will suffer from a negative revenue impact in their own currency. The second positive factor is the recent fall in oil prices, which leads to lower jet fuel prices. The cost of Brent crude has fallen. For non-U.S. airlines, the fall in the dollar further lowers the cost of jet fuel in their own local currency. However, the fall in crude oil prices is itself a signal of a weaker global economic outlook. In the U.S., there was a hope among some in the airline industry that the second Trump term could be positive for aviation, with the president expected to reduce regulation. Senior airline executives and other U.S. aviation leaders said at the CAPA Airline Leader Summit Americas in Grand Cayman in April that dialogue between the industry and government officials had significantly improved under the new leadership. Now, U.S. airlines arguably find themselves stuck in a psychological tug of war in which they remain optimistic that Trump will initiate positive changes for the industry but are reeling from a whiplash of the trade policies that are upending their financial forecasts. It is a safe bet to assume that airlines are not as concerned about transportation policy as they are about their profitability for 2025 and beyond. There's an argument to be made that if the tariff turmoil continues, there could be fewer airlines. Copyright © 2022 Nigerian Tribune Provided by SyndiGate Media Inc. (
Globe and Mail
14-05-2025
- Business
- Globe and Mail
3 Top Growth Stocks to Buy and Hold Forever
The U.S. equity market has been grappling with high volatility in 2025, as investors fear a potential recession amid escalating trade wars. However, this period of market uncertainty can also help long-term investors compound their wealth, especially if they can ignore the short-term noise and instead pick stakes in companies that are riding secular tailwinds, have durable moats, and are expanding their profitability. If you check the daily headlines, you will see that companies like Meta Platforms (NASDAQ: META), Microsoft (NASDAQ: MSFT), and Palantir Technologies (NASDAQ: PLTR) seem primed for an exceptional long-term growth trajectory. Here's why these stocks are smart picks now. Meta Platforms With CEO Mark Zuckerberg strategically focusing on artificial intelligence (AI)-driven innovation and effective cost management, Meta has strengthened its position as a leading player in the digital advertising space. The company's recent quarterly results were impressive, with revenue and earnings surpassing consensus estimates. Meta's 3.4 billion-strong user base remains a significant strength, as it provides the company with access to a vast amount of personalized first-party data. The data helps train AI models, which are then used to improve user connections and experiences on the company's social media platforms. In the past six months, AI-powered recommendations helped boost time spent on Facebook by 7%, on Instagram by 6%, and on Threads by 35%. A more engaged user base also translates into better conversion rates for the platform's advertisers. The Generative Ads Recommendation Model enhances ad targeting and boosts conversion rates. This flywheel effect has helped Meta create a durable moat that competitors are struggling to replicate. Despite these advantages, Meta trades at 21.5 times forward earnings -- reasonable for a company with expanding profit margins, $70.2 billion in cash, and $28.8 billion in debt. All these factors make the stock a worthwhile buy-and-hold forever opportunity now. Microsoft Microsoft's diversified business model and consistent execution have made it an exceptional buy-and-hold stock for the long-term investor. Recent earnings performance has highlighted Microsoft's resilience even in a challenging economic environment. The company surpassed consensus analyst estimates for both revenue and earnings. Microsoft's commercial remaining performance obligations (RPO, a metric to gauge future revenue and earnings potential) also rose 34% year over year to $315 billion. The company's AI strategy, which involves integrating advanced AI technologies into its core offerings, has also proven very successful. The Azure cloud computing platform experienced 33% year-over-year growth, with AI services accounting for 16 percentage points of that growth. This performance has helped alleviate some of the concerns about a potential slowdown in the cloud business. Furthermore, management expects Azure revenue to grow 34%-35% in constant currency terms in the fourth quarter. Accounting for a 22% share of the global cloud infrastructure services market (second only to Amazon 's AWS at 29%), Azure is experiencing rapid expansion in data center capacity and enhanced model capabilities. These moves can further help Azure capture share in the expanding global cloud computing market. Microsoft 365 Copilot, an AI-powered virtual assistant, is also experiencing a 3x year-over-year increase in customer adoption. The company's Copilot Studio is enabling more than 230,000 organizations, including Fortune 500 companies, to build custom AI agents. All of these AI initiatives are strengthening Microsoft's competitive moat. Shares of the tech giant trades at 26.2 times forward earnings, significantly lower than their five-year average of 33. Hence, with healthy top-line growth, expanding operating margins, $79.6 billion in cash, and AI-powered growth, Microsoft is a worthwhile investment, especially at current reasonable valuation levels. Palantir Technologies In the past few years, Palantir Technologies has evolved from a data analytics contractor working mainly with government and defense agencies to a major ontology and AI-powered operating system for modern enterprises. The company helps its clients integrate and analyze vast amounts of organizational data across silos to derive actionable insights. Palantir's impressive earnings performance for its fiscal 2025's first quarter has underscored the strong demand for its AI-powered solutions from both government and commercial clients. Revenue was up 39% year over year to $884 million. The company's U.S. revenue increased 55%, accounting for 71% of its total revenue. U.S. commercial revenue soared dramatically by 71% and has now crossed the $1 billion annual revenue run rate milestone. Palantir's Artificial Intelligence Platform (AIP) is seeing unprecedented demand. What differentiates AIP from its competitors is its focus on deploying AI solutions in a real-time environment in a secure and observable manner, rather than advanced model development. The company's proprietary ontology system -- a digital framework that helps relate an organization's digital and real-world assets -- is a significant competitive moat, as it facilitates understanding the dynamic relationships among the clients' operations, even when the underlying data assets are messy and fragmented. With this robust ontology layer, regular business users can now build, test, evaluate, and deploy AI-powered agents using the AIP platform. Palantir is also evolving from being a pure-play software company into one that offers integrated software and hardware solutions. The company has already delivered some TITAN (Tactical Intelligence Targeting Access Node) systems -- AI- and machine learning-powered systems that connect soldiers on the battlefield with data from various sensors to the U.S. Army. Consequently, Palantir is well-positioned to capture a significant share of the $1 trillion defense budget for 2026. Palantir is trading at 208 times forward earnings, which is significantly higher than its five-year average of 145. Although the valuation is very expensive, it can be justified considering that growth companies with exceptional long-term growth prospects have been known to enjoy rich valuations for several years. Investors should consider buying a small stake in Palantir, even at elevated valuation levels. Should you invest $1,000 in Meta Platforms right now? Before you buy stock in Meta Platforms, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Meta Platforms wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $613,951!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $796,353!* Now, it's worth noting Stock Advisor 's total average return is948% — a market-crushing outperformance compared to170%for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks » *Stock Advisor returns as of May 12, 2025 John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Manali Pradhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Meta Platforms, Microsoft, and Palantir Technologies. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
Daily Mail
08-05-2025
- Business
- Daily Mail
Malcolm Turnbull quietly parts ways with US finance firm after sledging Donald Trump in epic war of words
Malcolm Turnbull 's public attacks on Donald Trump earlier this year may have cost him his cushy job as an advisor to one of the world's biggest private equity firms. After his departure from politics, the former prime minister joined New York-based Kohlberg Kravis Roberts & Co (KKR) in 2019 as one of its Asia Pacific senior advisors. In the well-paid role, Mr Turnbull counselled the firm on doing business in the region using the knowledge and contacts he built through his corporate and political careers. But Mr Turnbull no longer appears on the firm's website after he was reportedly shown the door following his highly publicised spat with Trump. In an interview with Bloomberg in March, Mr Turnbull called the US president 'chaotic, rude, abrasive and erratic' before criticising his stance on global trade and predicting that China would 'take massive advantage' of him. Trump fired back on his Truth Social network that Mr Turnbull was a 'weak and ineffectual' leader and 'never understood what was going on in China'. Not to be outdone, Mr Turnbull then called Trump a 'billionaire bully' in a National Press Club speech and urged other Australian politicians to 'stand up' to him. KKR has extensive investments in the US, China and Australia, with one source telling the Australian Financial Review that Mr Turnbull had been cut loose to avoid rocking the boat in waters already made choppy by Trump's trade wars. In one deal he helped broker for KKR as part of a $100million funding round, he introduced the firm to AI robotics company Advanced Navigation, which he had also personally invested in. The appointment marked a return to the world of finance for Turnbull, a former lawyer who held a host of high-profile corporate roles before entering politics as a local member of parliament in 2004. In the 1990s, Turnbull was the local managing director of global investment bank Goldman Sachs. He was also an investor in one of Australia's first internet service providers, OzEmail, reportedly buying a stake for $500,000 in 1994 and selling it for $57million to MCI Worldcom five years later. Turnbull had several shadow ministry and cabinet positions for the Liberal party and coalition government before orchestrating a leadership coup and becoming prime minister in September 2015. He was himself unseated as prime minister in another leadership challenge in August 2018 by Scott Morrison, one of four Australian prime ministers to be overthrown by their own party in a decade. Turnbull's first appointment since leaving politics put him in the company of several Australian leaders to take up financial advisory roles after leaving office. The former Labor prime minister, Paul Keating, became an adviser to the investment bank Lazard Australia, while the former New South Wales premier Bob Carr became a consultant to the country's biggest investment bank, Macquarie Group. KKR counts more than two dozen senior and industry advisers among its personnel. They provide counsel on the investment implications of trends and developments in public policy, regulation, societal needs and technology around the world. Among the other senior advisers KKR brought on board with experience in the Asia Pacific region were former HSBC group chairman John Bond and former Qantas chairman Leigh Clifford. Former Singaporean minister Lim Hwee Hua also served as an advisor.
